Articles Posted in Conservation Easement

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with financial advisors and brokerage firms who recommended questionable tax shelters. Broker-dealers frequently peddle investments that are loaded with false bonuses such as earning a return on an investment plus reaping a generous tax break. Yet often those write-offs garner the attention of the IRS and can trigger a stream of tax troubles.

Syndicated conservation easements were offered as a triple win. By donating your land for conservation purposes, you could take a generous federal tax write-off. Brokers selling these partnership deals promised that for every dollar you invested, you could reap up to $4 in charitable tax deductions. The investments were packaged and sold to thousands of investors. The IRS, however, didn’t approve these partnerships and took 1,400 investors and syndicators to court, claiming the operators shorted the U.S. Treasury of some $11 billion through illegal deductions based on inflated land appraisals. Some of the originators and marketers of the partnerships face jail time.

According to Bloomberg News, “two brothers who pleaded guilty to federal charges — Stein Agee, 42, and Corey Agee, 38 — said they prepared false tax returns for clients and that each received $1.7 million in commissions from 2013 to 2019. They arranged bogus deductions on syndicated land-conservation investments around Asheville, North Carolina, and near the coast in Georgia and the Carolinas, court records show. They each could face as much as five years in prison but would likely receive less time. That’s because they are cooperating with prosecutors in Charlotte investigating an accountant and developer named Jack Fisher, who organized at least 23 such deals across the U.S., people familiar with the probe said.”

Chicago-based Stoltmann Law Offices, P.C. offers contingency fee representation to investors nationwide who have been hit by the IRS for tax issues related to conservation or land easement investments sold by investment and financial advisors.  High-income investors are lured into investing in these products based on the promise of legal tax savings.  Through a complicated and circuitous waterfall, investors in conservation or land easements, can receive income tax breaks sometimes worth several times the amount of their actual investment. As the old adage goes, if it sounds too good to be true, it probably is.

A recent article by Investment News lifted the lid on three specific easements that resulted in an arbitration complaint by the investors, and includes an unsavory connection to motivational speaker Tony Robbins. The easements at issue in the investor complaint are:

  • GWM Capital Real Estate

Stoltmann Law Offices, P.C. is a Chicago-based investor rights law firm that offers nationwide representation to investors who suffer investment losses as a result of unscrupulous, negligent, or fraudulent misconduct of financial advisors. In a tale as old as time, people prefer to avoid paying taxes if they can do so legally. The legality of tax breaks can be a touchy and constantly developing subject.  An increasingly popular way for very wealthy land owners to generate massive tax write-offs is called the “conservation easement.”  Simply put, in exchange for promising not to develop land, in the name of conservation, a land owner promises not to develop the tract. By doing so, the value of the property depreciates – because it cannot be developed – and theoretically, the owner of the land gives up something of value – the right to develop and exploit the land.  The land owner then gets a tax deduction, which depends on two critically important factors: 1) the value of the property before the easement; and 2) the value after the easement. The spread between these two numbers is then used as a tax deduction.

And there is where the fraud begins, according to the IRS. Recent report published by Bloombergtax describes the increasing aggression with which the IRS and Department of Justice are prosecuting conservation easement transactions as crimes.  One very notable transaction being investigated by the Manhattan District Attorney’s Office involves former President, Donald Trump, and an approximate $25 million tax break he received in connection with a conservation easement on land he owned in upstate New York. The tax scam begins with the appraisal of the land at values exponentially higher than reality, to appraisals after the easement well-below reality.  That increases the spread – the tax loss – taken by the owner.  These appraisals are done by professional outfits with attorneys and appraisers who sign off on all of these deals, and who can find themselves in a serious lurch with authorities.

These conservation easements became increasingly complex over time, involving massive tracts of land and found themselves being marketed and sold by FINRA registered broker/dealers as Regulation D private placement investments.  The purpose of this scenario for investors is the tax break for the land owners trickles-down, through a series of complicated trusts and transactions, to the investor.  Sometimes investors get upwards of 10X their investment back in the form of a tax write off.  Usually, the write-off is for between 2X and 6X the investment. For example, if an investor puts $25K into a conservation easement offering 4X reduction, that investor can write-off $100,000 in income for tax purposes the next year.  For high income investors, that is a dream scenario.

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